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Immigrant-trade links, transplanted home bias and network effects

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Macro-level data for the US and 73 trading partners spanning the years 1980 to 2001 is used with a gravity specification to investigate the influence of immigration on bilateral trade. Prior research has identified immigrant stocks as a significant determinant of trade; however, this study indicates that the US immigrant-trade link is driven by immigration from relatively low income countries. A 10% increase in the immigrant stock is found to generate respectively 4.7 and 1.5% increases in domestic imports from and exports to the typical low income home country. The observed link is decomposed into two hypothesized channels-network effects and transplanted home bias. Considerable variation in per-immigrant trade effects is found across home countries: imports from the typical low income home country are estimated to increase by up to $2057 due to transplanted home bias and by as much as $2967 as a result of network effects, while exports rise by up to $910 as a result of networks.
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Document Type: Research Article

Affiliations: Department of Economics, Franklin and Marshall College, Lancaster, PA 17604-3003, USA

Publication date: 2007-04-01

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